The first step to fixing a cash flow problem is identifying the root cause
The first step in fixing a cash flow problem is correctly diagnosing what’s causing the pain. Once you know the underlying cause, a solution can be put into action and a long term problem can be avoided.
You may need to do the same things in the near term to boost cash this month or quarter, but only in fixing the root problem will you forever end your cash flow woes.
Following are five common cash flow challenges and associated solutions. Each challenge could be a root cause of a fundamental cash flow problem. The five solutions are common fixes to each of the challenges:
Cash flow challenges
- Not enough new customers
- Margins are too low
- Expenses are too high – this month, quarter, annual, etc.
- Customers don’t pay or don't pay on time
- Customers don’t purchase more than once or don't purchase often enough
Cash flow solutions
- Get more new customers
- Increase your price or reduce your cost of sale, goods, etc.
- Reduce expenses
- Shorten time to cash and collections
- Get customers to increase their rate and volume or repeat purchases
What would you add to my lists above?
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